Wednesday, March 30, 2011

As you can tell from the 1 year Freightways Ltd [FRE.NZX] chart above the share price of the company hasn't moved much in the last year. The stock is well off $2.62c lows reached in July 2010 and has been an erratic beast for the last year.

Like most other NZX stocks over the last year it is up on more positive economic sentiment but the reason why I have included it in today's post is that the stock has put on almost 10% in value over the last 2 weeks. The stock has risen from just over 3 bucks to close at $3.28 yesterday.

This is on no material news at all in March but on a big spike in trading at the beginning of the month. Who was buying on that day I don't know but the stock has rallied over 8% post that trading day.

The positive result out in mid February had an impact on share price at the time but the share price drifted down through the first part of March.

$3.30 seems to be the price ceiling for this stock of late and I think investors might want to wait if they wanted to add this stock to the portfolio because it could come back as the economy bites again mid Winter on this bellweather company.

Tuesday, March 29, 2011

I am a little worried about the Accident Compensation Corporation having such an influence, in terms of sharemarket liquidity, on the local NZX.

It has been buying up significant stakes in several NZX listed companies and now owns over 4% of the free-float of the market:

The Accident Compensation Corp now has significant stakes in 28 NZX-listed stocks, cementing is position as the biggest player in the market.

ACC manages some $13 billion of assets and had about 10 per cent of its reserves in New Zealand equities in 2010. So far this month it has declared holdings of at least 5 per cent in Argosy Property Trust, Abano Healthcare and Pumpkin Patch, while adding to its stake in Nuplex Industries. In February it emerged as a holder of DNZ Property Fund, Goodman Property Trust, Mainfreight, Tourism Holdings, Kermadec Property Fund and Restaurant Brands.

"New Zealand equities are cheaper than they once were but you can say the same thing about global equities," said Nicholas Bagnall, the state-owned accident insurer's investment manager.

He wouldn't be drawn on whether the disclosures point to a bet on a revival in New Zealand's economy, which the International Monetary Fund sees growing just 1 per cent in calendar 2011 before accelerating to 4 per cent in 2012, helped by the rebuild after the Christchurch earthquake. Figures this week showed the economy narrowly avoided a double-dip recession last year.

ACC now owns more than 4 per cent of the free float of the New Zealand stock market, giving it influence over liquidity in some of the nation's biggest listed companies as well as smaller-cap firms.

"We're effectively enhanced our returns by being a seller of liquidity to the market," Bagnall says. "It works for us and it works for the market as well."

The corporation's investment mandate is to ensure it can cover the long duration of claims liabilities. Its allocations between asset classes tend to be "riskier than the minimum possible risk position," according to ACC's 2010 financial condition report.

It may not seem like a problem to the uninitiated but the New Zealand Stockmarket already suffers from a lack of liquidity and while this obviously will have positive effects as the ACC is buying, it will have very negative effects when they sell.

The ACC has a short term relationship to our market and its main pursuit is to extract the best returns for its investments as possible - as we all do - but that goes against the sort of long-term investment that the NZX has been pushing for the last 10 years.

In short the size of ACCs stake in the NZX is bad for the average investor in the long term because they are able to manipulate the market because of that size.

What we need from this taxpayer funded Government Department is a upper cap - I suggest 5% - on what they are allowed to invest in terms of overall investment in the stockmarket.

It is our money after all and using it to compete against local investors to their detriment is clearly unwise at best and reckless at worst.

It keeps other private investors from using their own money and building up stakes in companies because the ACC are artificially competing with them.

Real competition still remains in the private realm not the bureaucratic one.

Fletcher Building Ltd [FBU.NZX] has risen considerably since its previous share price alert on Feb 28. From $8.63c on close of trade on February 26 the FBU share price is currently trading up 4c at $9.07 and up 49c or approx 6% in just over one month.

The stock has rise primarily on expectations that FBU will make bumper profits during 2012 on the back of the reconstruction of Christchurch post the February 22 earthquake.

The stock has risen by around 20% since the beginning of 2011 on news of a good 2011 full year result and the quake impetus.

The only question for investors is that just when the re-construction of Christchurch can begin and of course just when the income for that re-construction appears on company books.

An additional factor probably not taken into account by investors now piling into the stock is that how on earth the company will be able to handle significant amounts of rebuilding - estimated to be revenue of approx $2 billion per annum for 10 years - without first affecting revenue in other parts of the company and indeed whether the company has enough bums on seats, equipment and raw materials (in short their own business infrastructure) to be able to complete their task adequately of being the major constructor in the Christchurch rebuild.

While the current share price is breaking 3 year highs it appears that the market now sees this stock as a relative bargain if the Christchurch factor is entered into the equation.

Proceed with caution if you are interested in this company as initial share price movements could be the market overreacting to the Christchurch quake and subsequent trading could see some selling.

The Share Investor Portfolio was up in the forth week of March. The portfolio was up by 1.02% or $2760.00 on the March 21 update . For the first 12 weeks of 2011 the portfolio has increased by 5.6% or $13978.77. This weeks rise was due, primarily, to a 15c rise in FRE, WHS rising slightly and a 34c rise in FBU, with a wide range of other smaller variations up and down across the portfolio.

The total of unspent dividends and interest in the bank from the 2010 - 2011 earnings years is $ $23479.21 at close of reporting season for 2010 and partway through the 2011 year. There are also approx $50000.00 in tax credits earned from the portfolio since it began in late 2002.